Refund after the payout: reconcile the later deduction

Follow the money after the refund has been approved. Confirm its tax adjustment and posting details with your practitioner.

Identify the refund and its current funding status

Open the original payment, then the refund record. Note whether the refund was requested, processed or failed, and look for the actual funding movement. Don't create a second refund because the customer has not yet seen the first one.

Square's refund guidance says funding can come from the Square balance or the linked bank account, depending on available funds and transfer arrangements. Check the statement rather than assuming every refund reduces the next payout.

Follow two settlements without changing history

Event	Bank movement	Merchant clearing balance
Day 1: completed sale $500	None yet	$500
Day 1: fee $10 and payout $490	+$490	$0
Day 3: new card sales $800	None yet	$800
Day 3: refund original sale $500	Funded from current balance	$300
Day 3: fee on new sales $16; payout $284	+$284	$0

Original ASBG worksheet with fictional AUD figures. The table is also the text equivalent of the example.

This simplified example assumes the $500 refund is deducted from the current balance, the original $10 fee is retained, and there are no other adjustments. Total sales of $1,300 less the $500 refund and $26 of fees equal $774 of bank receipts: $490 + $284. These figures illustrate the cash trail only; GST entries have not been determined.

Match the export before adding a manual entry

Check whether the POS or accounting connection has already exported the refund. Compare the refund ID, gross amount and original sale reference. A separate bank debit may simply fund an existing refund entry; treating it as another sales refund would double the correction.

If the bank debit fails or the provider reverses its adjustment, retain both events. The clearing balance should reflect what actually remains outstanding. Match the reversal to its original entry instead of deleting the failed attempt from the record.

Keep the tax document with the original sale

Save the original invoice, refund receipt, reason for the change and any adjustment document. A lower later payout does not tell you which tax period or tax code to use. Ask your BAS or tax practitioner to confirm the adjustment requirements and the accounting method that applies to the original sale.

The review needs to distinguish a change to an accurately reported sale from an error in the original reporting. For a mixed basket, preserve item-level tax information rather than applying a blanket fraction to the bank deduction. The published tax-invoice guide provides the broader document context.

Confirm the refund and close the balance

Save the provider's final status and give the customer the refund receipt where available. Reconcile any retained processing cost with the refund-fee worksheet. Then revisit the settlement bridge and the bookkeeping guide so the clearing account and bank each have a complete trail. Related guides are grouped in the payments hub.

Key takeaways

• Preserve the original payout as it occurred.
• Trace the later deduction or debit to one refund.
• Have adjustment documents and tax timing checked separately.

Refund after payout
Original sale / payment / payout IDs:
Original bank receipt date and amount:
Refund ID / approval / amount:
Refund funding: later balance / bank debit / other confirmed route
Fee returned or retained:
Refund status checked at:
Clearing movement / outstanding balance:
Adjustment document and GST review reference:

Where to get help

• Square: customer refunds and fee treatment
• Square: match transfers to sales